According to the report, most of the $23 billion initially loaned to General Motors and Chrysler late last year, prior to their bankruptcy filings, will likely go unpaid, leaving U.S. taxpayers on the hook. Among amounts expected to go unpaid are $5.4 billion in loans granted to the old Chrysler company.

In its report, the panel concluded that though the Treasury Department "negotiated aggressively with all the players in the automotive industry," the agency struggled with competing objectives. The Obama administration's Treasury Department, headed by Timothy Geithner, drove a hard bargain, said the panel's chairwoman, Elizabeth Warren, a Harvard University law professor. "But it may not be enough," she said.

For the government to recoup its investment, shares of Chrysler and GM, both newly emerged from bankruptcy, will have to appreciate sharply, the report said. The U.S. government owns about 61 percent of GM and 10 percent of Chrysler. Though both companies are currently privately held, they are expected to issue stock, as soon as next year in GM's case.

The 220-page report also questions Treasury's goals in using funds from the Troubled Asset Relief Program, or TARP, to bail out Chrysler and GM, a decision initiated by the Bush administration and continued under President Obama. The $700 billion program was established to help boost liquidity among banks.

The Congressional Oversight Panel was created as part of the legislation to add an additional layer of oversight beyond those provided by the General Accounting Office and a TARP special inspector.

The report asks whether the bailout money was used to prevent an uncontrolled liquidation of the companies as an effort to stave off a possible run on financial markets and a threat to the overall economy, or if Treasury wished to advance broader policy goals, such as improving fuel efficiency or saving jobs.

"To date, Treasury's public statements provide little clarity," the report says, adding that these and other objectives have been cited at various times. The report further questions the government's role in the auto industry bailout, noting that it "raises serious oversight issues."

Another panel member, Rep. Jeb Hensarling, a Texas Republican, dissented from the report. The auto companies should never have received funding, he said. "In my view, the administration used taxpayer funds to orchestrate the bankruptcies of Chrysler and GM so as to promote its economic, social and political agenda."